Tax Time: Deduct Health Care Costs

Last week, I hauled myself in to the accountant to get my taxes done, and the taxes for my self-employed LLC done. I’m fairly organized, and I like to have most of my stuff together before I go in. One of the new things I did this year was, in addition to keep track of health insurance premiums, to keep a good record of the medical expenses I incurred that weren’t covered by health insurance.

Deducting health care costs is one way I try to make up — at least a little bit — for the fact that the blood suckers in the health insurance industry are constantly looking for creative ways to raise my premium in spite of my mostly healthy lifestyle.

If you were wondering what you might be able to deduct, eHealthInsurance.com offers a handy list of tips for deducting health care costs:

Above the line for health insurance premiums: This goes on the front side of your Form 1040. I do this. It’s lovely, lowering my taxable income. However, there is a caveat, says eHealthInsurance: “[Y]ou may not deduct premiums paid for any month in which you were eligible to participate in an employer-sponsored health insurance plan, and that the amount you deduct cannot be greater than your net self-employment income for the year.”

Itemized health care costs: If you itemize on Schedule A, you can deduct some of your other costs this way. You can deduct co-pays, medical supplies, services and other health care items that your health insurance company does not provide. You only get to itemize, though if your 2009 expenses exceed 7.5% of your Adjusted Gross Income.

Contributions to your HSA: A Health Savings Account is a great way to get another deduction, and money accrues, helping you pay for health care costs down the road. eHealthInsurance comments on the limits: “For the 2009 tax year, HSA contributions were limited to $3000 for individuals and $5,950 for families.”

You should also be aware, says eHealthInsurance, that a COBRA subsidy can increase your taxable income. Before you take any deductions, you should do research, checking with the IRS web site, or talking to a qualified tax professional in order to make sure that everything is properly done.

Expert Profile

Miranda is a financial journalist. Her work has appeared in a number of publications, online and off, and been mentioned by the Wall Street Journal, USA Today, NPR, and Consumerist. Miranda is a contributor to U.S. News & World Report, and writes at the blog Planting Money Seeds. She is also a panelist for the Money Mastermind Show, and the Money Tree Investing Podcast.

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